How Companies Can Make Millions off American Public Education, Despite Not Doing a Very Good Job

Pearson Education is one of the country’s largest education companies. The British-owned conglomerate is the parent of a variety of media brands, including Addison-Wesley, BBC Active, eCollege, Fronter, Longman, MyEnglishLab, Penguin Readers, Prentice Hall, and Financial Times Press. The company’s Operating profit in 2012 was about $1.4 billion.

But that doesn’t mean the company is altogether doing a good job. According to this fascinating article at Politico:

Pearson stands to make tens of millions in taxpayer dollars and cuts in student tuition from deals arranged without competitive bids in states from Florida to Texas. The review also found Pearson’s contracts set forth specific performance targets — but don’t penalize the company when it fails to meet those standards. And in the higher ed realm, the contracts give Pearson extensive access to personal student data, with few constraints on how it is used.

…Public officials often commit to buying from Pearson because it’s familiar, even when there’s little proof its products and services are effective.

Pearson products don’t really work, but the company still makes money.

That’s mostly because there’s no one else playing; the company has a virtual monopoly.

One of the big ways the company manages to do so well is because of the No Child Left Behind act, which mandated extensive standardized testing and data collection. But there weren’t too many companies available to perform and evaluate that data, except Pearson.

And so states mostly went with the company. It was just easier that way. A familiar story is that of North Carolina:

The North Carolina Department of Public Instruction… declined to seek competitive bids for a new student data system on the grounds that it would be “in the best interest of the public” to simply hire Pearson, which had done similar work for the state in the past. The data system was such a disaster, the department had to pay Pearson millions extra to fix it.

The article says that the reason the company manages to do so well lately is its particular emphasis on what obsesses American policymakers: an education “crisis” and the desperate search for technological solutions to structural problems.

As the author puts it:

Its software grades student essays, tracks student behavior and diagnoses — and treats — attention deficit disorder. The company administers teacher licensing exams and coaches teachers once they’re in the classroom. It advises principals. It operates a network of three dozen online public schools. It co-owns the for-profit company that now administers the GED.

Because no one else has such power. Once you have 10 contracts, it’s easy to get the next one.

That’s all well and good; there’s nothing wrong with running a business that makes money. Except for one thing. Pearson can’t show is that its products work. It simply can’t demonstrate higher student achievement as a result of the use of its products.

Indeed, it appears the reason governments keep hiring Pearson is some combination of market power and just inertia. Pearson is big enough that it says it can address any education problem, even when it can’t do it very well.

The history of education reform over the last 20 years or so demonstrates that schools and teachers can be punished, eventually, for low performance. But governments get in gigantic trouble, immediately, if they don’t implement the technical tracking and reform systems that are necessary to measure how students are performing.

Into this conundrum steps Pearson. Schools would like to make improvements, but they have to try to address and track performance. It appears the company specializes in suggesting it can do the former, while immediately fixing the later. That second part is the way to really make money in education reform. It’s not fixing problems that can result in huge profits; all a company needs to do is measure them.